UAL chief cuts salary by $133K after loan guarantee rejected
By Lynne Marek
Bloomberg News Service
The chief executive officer of UAL Corp. cut his pay 16 percent after federal officials rejected a loan guarantee request by the company, the parent of United Airlines.
Glenn Tilton, the company's 56-year-old chairman, "made the personal decision to reduce his salary" to last year's level of $712,500, from $845,500, Chicago-based UAL said in a filing at the U.S. Securities and Exchange Commission.
United, the world's second-largest airline, has told employees that the carrier must reduce costs to attract financing after the U.S. Air Transport Stabilization Board turned down a $1.6 billion loan guarantee June 28. The company said last month that it won't contribute to its pension plans while in bankruptcy, prompting lawsuits from one of its unions.
Tilton's decision helps show employees that all of United is "working toward the same goal," said Susan Donofrio, a Fulcrum Global Partners airline analyst in New York who doesn't have a rating on UAL. "It's more symbolic than anything else."
The carrier said the guarantee would have provided up to $2 billion to finance an exit from Chapter 11 bankruptcy by the end of June. The U.S. board denied the request, saying UAL could raise the money on its own.
The International Association of Machinists filed a lawsuit yesterday in U.S. District Court in New Jersey against Tilton and two other UAL officers for halting pension contributions. The suit says the executives failed to treat all creditors equally.
The union — representing 27,000 United bag handlers, customer service agents and other workers — filed a similar lawsuit in Chicago last week. In that suit, the union said officers, including Chief Financial Officer Jake Brace and Chief Operating Officer Peter McDonald, didn't oversee pension plans properly.
United said the suit filed yesterday is "groundless and has no more merit than the lawsuit filed last week."
The company's shares fell 8 cents to $1.21 in over-the-counter trading at 3:59 p.m. in New York.
UAL has said that the shares aren't likely to have value after the reorganization.
